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Audinate: USD falling headwind, Bond yield falling tailwind…

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    Audinate: USD falling headwind, Bond yield falling tailwind…

    Hi MM Team, Recently you suggested taking profits/reducing Audinate (AD8) around $13 on the back of its good recent run and the anticipation that a falling USD may hurt their valuation. Since then the price has rallied another ~13% to now $14.77. With your view on (hopefully) falling bond yields in the medium term (which maybe has started to play out now) which should be a tailwind for the stock, I would very much appreciate an update on your AD8 view. Wouldn't falling yields provide a greater benefit than the falling USD, overall perhaps pushing the stock even higher in the next year or so? Many thanks, Michael

    Answer

    Hi Michael,

    There are some opposing forces at play in Audinate (AD8) as you rightly point out, and at the moment the bull case of lower bond yields and ongoing execution operationally is proving to be the stronger combination, with the stock hitting all time highs as I type. AD8 trades on ~105x est FY25 PE, a massive valuation which means a lot has to go right to see this stock continue to tick higher. We flagged our view that a weakening USD could put some pressure on the valuation, but concede that this is a high quality business with strong earnings growth in a sector with a tailwind from lower yields.

    We currently hold a 4.5% position in AD8 in the Emerging Companies Portfolio, sitting on a ~65% profit. We are looking to trim this position further, given the live weighting in the portfolio is over 6% given the appreciation in price since we bought it at the end of 2021.

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    Audinate Group (AD8)
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